AP Macroeconomics Unit 1 Section 2 Vocabulary

black market

an economic activity that takes place outside government-sanctioned channels, usually to let participants avoid government price controls, taxes, or laws

change in demand

a shift in consumer desire to purchase a particular good or service, irrespective of a variation in its price

change in supply

a shift in production or output of a good/service

competitive market

a market wherein there are a large number of entities offering the same goods/services, and a large number of consumers to interact with said producers, creating a lack of a single dominant power

complement

goods/services/ that are frequently used together or add value to one another, therefore affecting each other’s supply and demand

demand curve

a graphical representation of the relationship between the price of a good/service and the quantity demanded for a given period of time

demand schedule

a table that shows the quantity demanded of a good or service at different price levels; can be graphed as a demand curve

equilibrium

 condition or state in which economic forces are balanced; economic variables remain unchanged from their equilibrium values in the absence of external influences

equilibrium (market clearing) price

the price at which the number of goods for sale is exactly equal to the quantity that buyers wish to purchase

equilibrium quantity

no shortage or surplus of a product in the market; supply and demand intersect, the amount of an item desired by consumers is equal to the amount being supplied

inferior good

a good whose demand drops when people’s incomes rise; goods that fall out of favor when consumers can begin buying more costly substitutes

input

any resources used to create goods and services, both tangible and otherwise

law of demand

principle that states that at a higher price, consumers will demand a lower quantity of a good

law of supply

principle that states that as the price of a good/service increases, the quantity (supply) that producers offer will increase

market

any place where two or more parties can meet to engage in an economic transaction

minimum wage

the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract

normal good

consumer products such as food and clothing that exhibit a direct relationship between demand and income; as a consumer’s income increases, the demand for these goods does as well

price ceiling

the mandated maximum amount a seller is allowed to charge for a product or service; typically applied to staples such as food and energy products when such goods become unaffordable to regular consumers

price controls

the legal minimum or maximum prices set for specified goods; implemented as a means of direct economic intervention to manage the affordability of certain goods/services

price floor

the lowest legal price that can be paid in a market for goods and services, labor, or financial capital

quantity demanded

the total amount of a good or service that consumers demand over a given interval of time

quantity supplied

the number of goods or services that suppliers will produce and sell at a given market price; differs from the actual amount of supply (the total supply) as price changes influence how much supply producers actually put on the market

shortage

a condition where the quantity demanded is greater than the quantity supplied at the market price

substitute

a product or service that consumers see as essentially the same or similar-enough to another product, so it can be used in place of it

supply curve

a graphic representation of the correlation between the cost of a good or service and the quantity supplied for a given period

supply schedule

a table that shows the price of a good/service in relation to quantity supplied; can be graphed as a supply curve

surplus

the amount of an asset or resource that exceeds the portion that's actively utilized

supply and demand

a theory explaining the interaction between the sellers of a resource and the buyers of it